Hartford’s credit rating has taken a hit for the second time in 10 months.
Moody’s Investors Service said Tuesday it has downgraded its rating on the city’s $550 million in outstanding debt by one notch, from “A3” to “Baa1.”
The downgrade reflects what Moody’s said is the city’s weak financial position and use of one-time revenues to balance its operating budget. The company also cited Hartford’s limited financial flexibility due to rising fixed costs related to debt, pensions and retiree health benefits. Analysts said they believe Hartford’s prospects for raising revenue is weak and that it will be challenged to make meaningful spending cuts.
Another major ratings provider, Standard & Poor’s, also downgraded the city by one notch last month, from “AA-“ to “A+”. A credit-ratings downgrade can increase the cost of borrowing.
In the eyes of Moody’s analysts, the city’s fiscal picture has been downsliding for several years. Hartford held an “A1” rating from 2010 to Oct. 2014, when Moody’s downgraded the city to “A2.” Another Moody’s downgrade came in June 2015, when Hartford fell to “A3.”
The newest downgrade comes days after Mayor Luke Bronin released his budget proposal for the coming fiscal year.
Bronin wants to close a nearly $49 million budget deficit through a mix of layoffs, yet-to-be-bargained labor concessions, and other strategies. He would also empty the city’s remaining reserves, an action that could draw further negative scrutiny from ratings agencies.
Bronin said in a statement Wednesday that he had been anticipating the downgrade.
“The rating agencies are looking at the same numbers we are, and we’ve been very open and transparent about Hartford’s severe fiscal challenges,” Bronin said. “This rating action should serve as one more indication that we need to tackle our challenges head-on and act quickly to make the changes necessary to get our city on a path to fiscal health.”
The mayor told reporters Monday that he couldn’t avoid using some one-time revenues to close the deficit, though he said he was using relatively fewer of those sources than the city has in recent years. He said he refuses to sell city assets, like parking meters, though he wants to pay a part of the city’s pension payment by transferring ownership of Batterson Park in Farmington to the pension fund.
Bronin also said he doesn’t consider further debt restructuring to be an option.
But the city isn’t quite finished restructuring past debt.
Next week, it will issue $32.5 million in refunding bonds for borrowing in 2005, 2011 and 2012. Moody’s on Tuesday also assigned its Baa1 rating to those refunding bonds.
Bronin has said he doesn’t plan to borrow any money in fiscal year 2017.
